A story in this paper yesterday caught my eye: “Women representation on boards of listed companies should be mandatory.” This was a position stated by the Philippine Business Coalition for Women Empowerment (PBCWE) during a public event on Tuesday. In the group’s opinion, in listed companies, at least three out of 10 board directors should be women.
“We have countries who have imposed quotas including Malaysia, France, and many of the Scandinavian countries. If you impose quotas, there is a more compelling reason for companies to deliberately and intentionally recruit females,” said PBCWE Governing Council Chairperson Ma. Aurora D. Geotina-Garcia on the sidelines of the event.
“In my view, make it mandatory but not penalize them (listed firms) immediately. Give them time to comply,” she said. “Eventually, it becomes part of the DNA that they will consciously and intentionally say that when we start looking for board members, we should also deliberately have a goal of women’s representation.”
Even Securities and Exchange Commission (SEC) Commissioner Javey Paul D. Francisco, in a speech in the same event, noted that “it is evident that women remain under-represented in executive leadership teams and boards, and we still have a long way to go.” Thus, his push for gender diversity and the use of inclusivity benchmarks as well as tools to track women representation in boards.
A report made public during the event noted that only 13% of listed companies in 2022 had female CEOs; majority of these female CEOs are from the services sector, followed by the industrial sector and the property sector; and only 21% of publicly listed firms’ board members were women.
The SEC commissioner added, “It is clear our journey towards gender equality is far from over. Our vision is a future where gender equality is a given; where it is not just a matter of social justice but rather a strategic necessity and a smart business move leading to greater employee retention, enhanced creativity, and overall better business outcomes.”
While I support Ms. Geotina-Garcia’s and Commissioner Francisco’s call for women empowerment, I was just wondering why there was little mention in the story as to why there should be more women on the boards of listed firms. The news report offered little by way of explaining the clear advantages of greater female representation in company boards, and why this should be made mandatory.
The news report quoted Ms. Geotina-Garcia as saying that the ideal representation of women across the boards of listed companies was 30%. In 2022, we were already at 21%, without the requirement being mandatory. I failed to capture in the story why 30% was ideal, and why it should be mandatory rather than just encouraged, to achieve greater gender diversity in public companies. In fact, for “true” gender diversity, shouldn’t it be 50%? And, what about the LGBTQ community? Should the diversity discussion include them all?
As of 2024, several countries are already implementing laws or regulations requiring a certain percentage of women on the boards of publicly listed companies. Available information online indicate that Norway, France, and Spain require 40%; Italy and Belgium 33%; Germany and the Netherlands 30%; while Iceland also requires 40% for publicly listed companies with more than 50 employees.
In India and the United Arab Emirates, publicly listed companies must have at least one woman on their board; Israel requires at least one woman if the board has up to four members, and at least two women if the board has five or more members; while Malaysia has set a non-mandatory target of at least 30% of board positions to be held by women.
In the Philippines, if I recall correctly, boards of publicly listed firms should have at least two independent directors, or such independent directors should constitute at least 20% of the members of such board, whichever is the lesser. But there are no specific mandates for the number of women on boards. However, it is highly encouraged as a good governance parameter.
There is a growing global trend towards gender diversity in corporate leadership. But in considering whether gender diversity should be mandated, legislators and regulators should consider all arguments for and against. In my opinion, meritocracy should be upheld. Board appointments should be based on merit, qualifications, and experience rather than gender.
Otherwise, public firms run the risk of choosing less qualified candidates just to meet legal requirements. And women may just become “token” members of boards, chosen only to fulfill a government-set quota. There is also the question of whether there are enough “qualified” directors — men or women — to be appointed to the boards of all public firms. Should the mandate also cover non-listed firms as well?
And then there is the question of how much the government should “interfere” with how companies are run or whom they choose to appoint to their boards. Are we not better off giving public companies the freedom to make decisions that they believe are in the best interest of their business and their stakeholders, without state-imposed restrictions? Also, will mandates be seen as an infringement on corporate autonomy?
Obviously, in some countries, there may be strong cultural resistance to gender quotas. I do believe the Philippines is more progressive than others in this sense. Still, we should ensure that any mandate should not just result in superficial compliance. Worse, gender mandates may be seen as reverse discrimination, favoring one gender over another for board positions.
Perhaps the SEC and PBWCE can share data-based studies and evidence-backed research showing the positive impact of gender-diverse boards on company performance, and that mandated diversity leads to better business and social outcomes. The objective should not be compliance but rather improved performance.
Moreover, can gender diversity be a universal mandate? Will it work across all industries, company sizes, or various corporate contexts? I agree with the argument that the matter goes beyond board representation. Admittedly, there is gender disparity in corporate leadership. Data shows this already. Perhaps the solution is finding ways to diversify corporate leadership by empowering more women to take management or leadership roles. Then, meritocracy rather than a quota can also lead to these women getting on company boards.
Marvin Tort is a former managing editor of BusinessWorld, and a former chairman of the Philippine Press Council
